Corparate finance Essay Example | Topics and Well Written Essays - 2500 words

Corparate finance - Essay Example The Company also had been operating in a country with under-developed stock of exchange. There has been therefore the need to carry out research to look into the ways that the firm can maintain its development to a high level. The research is therefore expected to look into an alternative capital sources for the company and analyze the impacts of dividend policy and level of debt on the value of the firm. The firm having been operating under economy with under-developed stock of exchange limited its goals towards adjustments. Risks diversification opportunities were therefore limited for the company. The company’s investment decision was influenced by high diversification costs, making it to avoid financial market use. The technological adjustment is therefore limited as the company end up choosing production technologies that are less capital intensive subject to short-term risk. The company was therefore unable to adjust up to the latest technologies which were more capital intensive. The under-developed stock exchange market prevents the company from structuring their financial packages optimally (Levine, 2002). Conflicts of interest usually exist between the managers of the firms and its suppliers and customers, and also between different firm investors. Hoad Company if having high debt levels had increased its possibility of bankruptcy sufficiently which may put them into risky projects harming their creditors. The company, if highly leveraged, could be unable to get additional credit due to incentives created by debt financing to the taking of greater risks. Availability of well-developed stock of market exchange would allow for equity issuance. This issuance would mitigate problems of incentives providing room for more borrowing to the company. Stock market has always played an important role in the provision of information. A well-developed stock markets gathers information concerning prospects of companies that had their shares traded availing